Sudarshan Sareen, National President, All India Confederation of Small and Micro Industries Association (AICOSMIA), in an exclusive interaction with SupportBiz, highlighted the challenges and opportunities that the MSME segment is facing in India.

This holds a special significance when the Union Budget 2013 is just around the corner.

Edited excerpts:

What are the major challenges faced by Indian MSMEs?

There are several challenges that the MSME sector is facing presently. These challenges are serious in nature, and are affecting the sector negatively. Among these, the provision of Non-Performing Assets (NPA) has been extremely tough on the MSMEs in the country. The three-month period of NPAs is too short for any MSME, making it impossible for it to meet the expected performance metrics. We, at AICOSMIA, have urged the government to amend the provisions for NPA. We have requested the extension of NPA timelines; we believe that the period must be extended to about one year from three months.

Delayed payment is another major issue being faced by Indian SMEs. How do you look at this?

Delayed payment is, indeed, a big problem for MSMEs, and is the major reason for the failure of MSMEs. Delayed payments result in cash flow crunches, which then lead to financial downturn of the concerned businesses. Often, delayed payments end up making the concerned MSMEs sick units.

Government agencies have been working on this, coming up with guidelines and policies to help MSMEs in dealing with this problem. The Ministry of MSME has taken up this issue very seriously, too. However, there is a considerable lack of proper execution of guidelines and policies introduced by government agencies.

According to you, what is the impact of complex and stringent labour laws on MSMEs?

All of us know that China is doing very well at the global level, and that the country’s capabilities for international-level business have scaled great heights over the past two decades. This is largely because the legal framework in China is very much in favour of its MSMEs. On the other hand, in India, the scenario is different. For instance, there is no special consideration for MSMEs in the labour laws. The labour laws are the same for both large and small organizations. In such conditions, micro and small units have to suffer, as they work on thin margins, and the availability of labour becomes an issue. Inspection by local agencies in the name of complex labour laws keeps small entrepreneurs worried, annoying them at times. We want special consideration to be given to MSMEs in labour laws. Also, there is the need to come up with some new guidelines to ensure that the interest of MSMEs is protected.

What are your expectations from the upcoming Union Budget?

We are working on preparing a list of recommendations for the Union Budget 2013, which we will send to the concerned policy makers. It will mostly cover the issues faced by MSMEs in India, which we have discussed already. However, we will also draw attention to the area of skill development for MSMEs.